Retail in Asia


Hong Kong retail rents unchanged as weak conditions persist at year-end

Hong Kong’s retail rents were broadly unchanged in the last quarter, amid softer retail sales and a lack of new lettings, according to Savills in its Market in Minutes – Hong Kong Retail Leasing report for Q4 2022.

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Restricted by the social distancing measures and without the spending from inbound tourists, Q4/2022 saw little change in market tone from Q3. With household disposable incomes under strain, retail sales by value dropped by 0.7 percent YoY over the first ten months, among which spending on clothing and footwear and department stores declined by 9.6 percent and 9.3 percent YoY respectively. In some positive news, the F&B sector finally experienced a slight rebound in the third quarter, and the value of restaurant receipts rose by 9.3 percent QoQ, mainly due to the resumption of banqueting and family dinner gatherings in Q3.

For luxury retailers, the focus is on shopping malls rather than high street and as the younger generation become a greater force in the retail market, a shift has taken away from traditional mainstream luxury towards fresher concepts and more affordable offerings. Looking ahead, there are early signs of demand from PRC brands who have not yet entered the local retail scene and in this respect, the Li Ning flagship store leasing on Canton Road is significant. Li Ning is a major mainland sports brand named after the gymnast and entrepreneur who founded the company.

With hopes dashed early on in the year by the fifth wave of the pandemic, rents have ended 2022 largely flat even though a small number of landlords have recently used the possibility of border reopening with the Mainland to make minor increases. The British brand Fortnum & Mason’s new outlet at Hong Kong International Airport, as well as New World’s 3.8 million square feet 11 SKIES to be opened from 2023 to 2025 in phases, stood out among the quiet leasing market in Q4.

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Looking ahead to next year, a freer border will initially unlock demand from families keen to visit relatives in China and business travellers. Tourists will return first from Southern China, and this is typically driven by day tripper demand for convenience goods within easy reach of the border. However, given the outdoor mask-free policies and relaxed PCR test requirements in some of Hong Kong’s neighbouring countries, retailers and travellers are not expected to flood back to the city in the short term.